Freddie and Fannie, with their government backing, allowed the proliferation of 30-year, fixed-rate mortgages — a product that lenders would otherwise shun. Reason: Long-term, fixed-rate loans struggle in any interest rate scenario. If rates rise, banks are squeezed, because their revenue remains fixed even though they have to pay more for deposits and other funding. If rates fall, homeowners refinance. “No rational market participant is going to bear that risk,” Date says.

Long-term fixed-rate mortgages make sense only if the government is absorbing some of the risk. Reforming housing finance, Date says, could jeopardize the future of long-term, fixed-rate mortgages or raise interest rates on them, perhaps a quarter to half a percentage point.

…The Congressional Budget Office reports that government subsidies for homeownership, including the mortgage interest deduction, reached $230 billion last year. That compares with $60 billion in tax breaks and federal spending programs supporting the rental market.

Home values will plummet immediately if loan terms adjust to the real world or tax benefits are suddenly disallowed. Ordinary people who purchased homes in good faith, never asking anyone for a handout, will be ruined if a forward-thinking, free-market approach is ever adopted in real estate.

And it’s all because of bad public policy decisions adopted by do-gooders 70 years ago.

We end up here through the conceit of liberals who think it’s the government’s business to tinker with the economy. This is the fruit of an attitude in Washington — often a bipartisan one, mind you, but unmistakably opposed to free markets and local governance — that we both can and should tweak human behavior by creating complex, targeted tax policies from of the nation’s capital.

It’s hard to imagine a field in which government can do more damage than that of homeownership, but I’m sure the geniuses who voted for Obamacare without reading it are working on something as we speak. As lawmakers create such policies today — encouraging the purchase of certain cars, certain windows, certain fuels, certain health insurance plans, etc. — they should think first about the economic problems they’re already causing for people 10, 20 and 70 years from now.